Share outlook for 2013

Equity markets were entering the year 2012 as the year of many significant risks from the European debt crisis, despite the risk of a hard landing of the Chinese economy to the risk of accelerating inflation due to high energy and commodity prices. Yet we share our outlook for 2012, believed that it will be a successful year for equity investors, mainly due to low valuation markets and expected support from key central banks.

Now we can say that this is our estimate proved to be very accurate.It nonstandard interventions of central banks, led by the ECB, to a large extent contributed to the (albeit temporary) calm the situation in Europe and investors took advantage of low prices of risky assets. The result is a 13% increase in equity markets (MSCI World), and as the German market grew by almost 30%. The outlook for 2012, we set the expected value of the S & P 500 at 1,431 points, the index value for December 17, 2012 (closing date of this report) was 1430.

Now we stand on the threshold of a new year, and investors basic question is: "is the growth of equity markets already exhausted?". Our answer is "no". Yes, the valuation of shares has grown, and most of the risks from the global economic recession to the European debt crisis remains in the game, although not as strongly as they did in 2012.Nevertheless, we believe that valuation markets remain, especially in comparison with the yields of other assets, attractive - indexes are still valued by 10-15% below long-term averages.

This view is unusual in that the main risk to the global economy, U.S. fiscal cliff, is very acute and during a few days or weeks, we should know what the impact will have on the U.S. and hence the global economy. We, in our baseline scenario, we expect a satisfactory solving this problem, which should mean that the global economy will avoid falling into recesního zone. Corporate profits this year, according to our (relatively conservative) slows down its growth projection to just 3%, stock markets should have the annual balance improved due to the expected continued decrease in risk premiums that stock investors require.

Our target for the end of 2013 for the S & P 500 is 1,530 points, which represents a 7% growth potential. Similar potential also see the German Dax (target value b. 8101) and slightly higher in the Czech PX (b. 1119 target, 11% of potential).